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Continued from page 5

The Policy of Disruption

Since 2007, I have been increasingly focused on applying the Law of Disruption to regulation and policy. Business, for better or worse, is well along on the path to change. Law is not. Last year, I published “The Laws of Disruption,” looking at the ten most intense legal battles at the border of traditional existence and digital life. These included privacy, copyright, antitrust, crime, patents, infrastructure and human rights.

Fights over how to rewrite these sinking bodies of industrial law for our increasingly virtual lives have only intensified in the last two years, and in many ways are converging to a general revolution.

Grumblings over one-sided terms of service, limits on remixing content, government surveillance and excessive patent protections have sharpened into movements and advocacy, including Creative Commons, the Electronic Frontier Foundation, and TechFreedom, a new policy think tank aimed at limiting all forms of regulatory interference with innovation. (I work with TechFreedom as an adjunct fellow.)

Despite what existing governments may think, anarchy is not the only alternative to their continued monopoly. Rather, the revolutionaries--sometimes groping, sometimes articulately—are striving for a new social contract, one based on the unique social and economic properties of information.

The problem with existing law is baked right into the founding of the modern state. Democratic systems of government, after all, are designed to change slowly and deliberately, through separation of powers and checks and balances that ensure the passions of the day are tempered with wisdom before significant change occurs.

The business of government is truly normal science—a good day in Washington is a day in which absolutely nothing happens. And for the most part, when it comes to the regulation of innovation, doing nothing is the best way to help.

Governments do best when they establish a healthy environment for entrepreneurs—avoiding taxation of emerging industries, establishing markets that function with minimal transaction costs, incentivizing long-term research and investment and encouraging self-regulation of dynamic industries.

Safe harbors, including a provision of U.S. law that protects online publishers from lawsuits over third party content, establish clear (or clearer) boundaries for acceptable behavior, reducing the risk of failure for new ventures. A provision of California law that refuses to enforce most non-compete clauses allows talent to flow where it needs to go without undue friction, perhaps a key (but largely unsung) factor in the success of Silicon Valley over other high-tech geographies.

Governments do their worst when they try to intervene and micromanage fast-changing realities, especially when those realities are being shaped by technologies over which they have no experience or expertise. For then they are fighting the Law of Disruption, asking technology to change at the pace of the modern bureaucratic state. It's a doomed combination, like keeping one foot on the dock and the other in a speedboat.

In the last few years, I’ve participated in dozens of hearings and meetings on Capitol Hill to talk about regulating “the Internet.” There’s a bizarre and worrisome ritual at these meetings. Elected officials begin the conversation by confessing they’ve never used the products and services they proceed to praise or condemn. They feel obliged to act, they say, because they know their children are using them all the time. Why do they take such pride in their ignorance? And what are they really worried about?

The result isn’t surprising. The last decade in particular is littered with failed efforts to “solve” problems of on-line life that regulators didn’t define or even understand in the first place. At the federal, state, and international level, we have a body of worthless law aimed poorly at a range of early artifacts, including spam, spyware, identity theft, privacy, pornography, gambling, intellectual property, bullying, net neutrality.

Many of these issues turned quickly into other issues; some were solved by new technology, or by joint actions of users and providers. Some got worse.

In every case, new laws and new regulations did nothing to help. But they are hardly inert. Laws and rules are fixed in time in ways that technology is not. So even the best-intended laws can and increasingly do have unintended consequences later on, often exacerbating the very problem they intended to solve.

ECPA, a 1986 law on electronic surveillance, has never been updated, leaving most data stored in the cloud seizable without a warrant by law enforcement agents. A statute aimed at protecting government computers from hackers has been warped to impose criminal sanctions for violating the terms of service of social networking sites. Expect more, not fewer, of these perversions.